Lawyers for Insolvency Service likely to allege that KPMG did not examine Carillion\u2019s accounts properly<\/p>\n
Last modified on Wed 23 Jun 2021 13.10 EDT<\/p>\n
The government liquidator dealing with the fallout from the collapse of outsourcing firm Carillion is expected to make a claim for \u00a3250m against KPMG, the accounting firm that signed off on the former FTSE100 company\u2019s accounts.<\/p>\n
Lawyers for the official receiver, part of the government\u2019s Insolvency Service, have sent a letter before action to KPMG, warning the accounting and consultancy firm to expect a claim related to Carillion\u2019s rapid implosion in 2018.<\/p>\n<\/p>\n
The letter is a precursor to a full-blown lawsuit, likely to involve the Insolvency Service, alleging that KPMG did not examine Carillion\u2019s accounts properly, failing to spot that it was presenting a much healthier financial picture of itself than the underlying reality.<\/p>\n
The claim is expected to be funded by Litigation Capital Management, a stock market-listed company that invests in potentially lucrative lawsuits, according to Sky News, which first reported the pre-claim letter.<\/p>\n
Carillion buckled under the pressure of \u00a37bn of debt in January 2018, in a corporate failure that plunged 3,000 jobs into uncertainty and affected more than 450 major public-sector projects, including delaying work on two state-of-the-art hospitals in Liverpool and Birmingham.<\/p>\n
The high-profile failure led to calls for the government to rely less on outsourcing and sparked a public debate about the degree of scrutiny that auditors should apply to company accounts presented to them by directors. A report in 2019 found that the collapse cost taxpayers \u00a3162m, including delays affecting the HS2 rail project that Carillion was working on.<\/p>\n
The official receiver is still working through the liquidation of Carillion, a process that continues three and a half years after the company\u2019s collapse. It is doing so in tandem with KPMG\u2019s rival PricewaterhouseCoopers, one of the accounting firms accused by MPs of \u201cfeasting on the carcass\u201d of Carillion by charging \u00a372m in fees between them for advice in the years leading up to its demise.<\/p>\n
The official receiver\u2019s expected legal claim against KPMG is part of efforts to secure as much money as possible for some of the companies and organisations that Carillion owed money to when it collapsed.<\/p>\n
Earlier this year, the business secretary, Kwasi Kwarteng, launched a separate legal bid to ban eight former Carillion directors from holding senior boardroom positions. They included the former chairman Philip Green, who was once an adviser to David Cameron on corporate responsibility.<\/p>\n
MPs accused directors of \u201crecklessness, hubris and greed\u201d in an excoriating report into the company\u2019s failure.<\/p>\n
The Insolvency Service and KPMG both declined to comment.<\/p>\n